Dec 23, 2012

May 1974: Mars Hotel Letter & Business

May 20, 1974

Fellow Dead Head,

The new Grateful Dead album, From The Mars Hotel, is done and is on its way to the pressing plants for manufacture. We know you'll dig it.
Last year when we started this great adventure we tried mightily to deliver a top quality pressing by rigorously monitoring production. Sorry as we are to say it, absolute quality in this environment of scarcity and crises is almost impossible. So, we've made arrangements for processing that consistently yields discs of above average quality and we are using packaging design to protect that quality.
Experience has taught us that records are more likely to be messed up after they leave the pressing plants than during their manufacture and storage there. On the trucks and in people's homes, excessive friction between the disc and its paper sleeve causes wear and also a dust-attracting build up of static electricity. We feel we've corrected this in our new packaging (having borrowed some licks from Deutsche Grammophon).
You've probably heard rumors that the Dead are coming. The fact is, the band is on the road right now and is planning gigs everywhere for the rest of this year.
We know you'll enjoy our album, and if you get real enthused call a radio station or tell a record store. We need all the help we can get.

Gratefully yours,
Grateful Dead Records

* * * * *

GRATEFUL DEAD - FIRST NATIONAL BANK OF BOSTON IN JOINT DISTRIBUTION VENTURE

The Grateful Dead recording group, with the aid and financial blessing of the First National Bank of Boston, has formed a network of eighteen independent distributors throughout the United States to handle its product. The decision to circumvent the traditional pattern of a record company was arrived at March, 1972, when Grateful Dead leader Jerry Garcia, and manager John Macintyre asked Ron Rakow to investigate the financial aspect of self-distribution.
Rakow applied his ten-year background on Wall Street with on-the-job training as the operator of a small finance company in surveying the distribution pattern. "Essentially, I determined what the cost factor would be if we were wrong. In college, I studied the First National Bank of Boston's Serge Semenko's involvement in the motion-picture industry and decided that, if we were to be successful, a solid banking affilation was a prerequisite. It was a natural for me to contact a bank that had previously demonstrated a willingness to work in the entertainment area."
James Dollard, assistant vice president of the First National Bank of Boston, explains the financial institution's viewpoint: "Record distribution is a new area for us; however, the Grateful Dead put together a solid presentation of cost and market projections. In addition, the independent distributors that committed themselves to handle the Grateful Dead's product are all solid businessmen. Of course, we were completely unfamiliar with the returns problem and are watching this area closely."
Rakow, who is president of Grateful Dead Records, first discussed the project with Alpha Distributors' Harry Apostoleris. "He listened patiently to all my questions and, when I was finished, answered them and then told me what further questions I should have also asked." [. . .]*
The group's first album under its own distribution was Wake of the Flood, released October, 1973. Sales were 420,000 pieces, with a nine per cent return, well under the industry average. "The returns are built into our cost factor, and because the Grateful Dead has developed a cult of its own, we enjoy a steady catalog sales. The returns afford us a cushion. We don't mind having a fifteen- to twenty-four-month inventory at hand, which is warehoused at the pressing plant."
From the bank's point of view, Jim Dollard reports its collection experience has been extremely favorable. "We establish a credit limit for each distributor and guarantee payment to the Grateful Dead. We have modified our agreement with the group three times because this is a new industry for us, but the overall outlook is pleasing." In addition to furnishing the credit, the First National Bank of Boston also performs all the bookkeeping and collection duties for the Grateful Dead. Each account is listed on the bank's computer and, within seconds, a financial profile of the distributor can be obtained.
Rakow reports that the last Grateful Dead album had a 15 per cent sales gain and "we made 240 per cent more profit."** The group is currently recording a new album which is scheduled for release on June 15.

(from Music Retailer, May 1974)

* [Omitted a list of distributors.]
** [Meaning, 240 percent more profit than they made with Warner Brothers. I've read that the Dead made 31 cents per record on WB, versus $1.22 on their own label. Not sure whether Rakow measured Wake of the Flood's sales gain from Europe '72 or from Bear's Choice, but probably the latter.]

2 comments:

The letter to Dead Heads seems a little less optimistic in tone to me than their '73 letters for Wake of the Flood had been: "Absolute quality is almost impossible... We need all the help we can get." Deutsche Grammophon is a prestigious classical-music label known for their high-quality pressings. I suspect it was Phil who suggested the Dead use a few of DG's packaging methods...

The article on Rakow & the Bank of Boston is dull & not too informative (with just a little unintentional humor), but I included it just so I could use this anecdote from Rakow:

"We had this relationship with the First National Bank of Boston. They were our factor. They guaranteed the credit of the stores and distributors we sold our records to. So I went to the First National Bank of Boston and told them that we were going to get involved in other projects around which Garcia had expertise. I asked for a two-million-dollar credit line with no collateral... I asked them to arrange for the senior executives of the bank to have lunch with Garcia at the bank... We walked into the 12th-floor executive dining room and Jerry Garcia was wearing, guess what, Levi's and a black t-shirt. We sat down with the chairman of the board... The chairman turned to Jerry and said, 'My daughter wants to play the clarinet. But my music person says it would be much better to start her on the violin. What do you think?' Jerry said, 'Let her do what she wants.' The guy said, 'Oh yeah!' The president of the bank turned to Jerry and said, 'We're getting a sound system. I'm going to get EPI speakers. What do you think of them?' Jerry turned to me and said, 'Rak, don't we have a deal with them?...' I said, 'They're good.' Jerry said, 'I've listened to them. I think they're really good. I think you'll be very happy with them.' The guy said, 'Oh, great!' After the appetizer, we started walking around the room and looking out over Boston. Jerry walked over to me and whispered in my ear, 'We're gonna own this place. This is fuckin' backstage, man.' They gave us the money." (Greenfield, p.176-77)

Later that year, Garcia & Hart even recorded a musical Christmas record for the chairman's deadhead daughter. But in '76, this cozy relationship with the bank would come crashing down...